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Switzerland: Cage fight against complacency

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Some think the second pillar is perfect, so 17 years ago four people set out to challenge that view with an innovative approach and an international viewpoint. Innovation Zweite Säule co-founder Werner Nussbaum tells Barbara Ottawa about challenges past and present

Every first Monday of the month, Second Pillar Innovation – or Innovation Zweite Säule (IZS) in German – invites interested parties to a cage fight, a verbal one of course. It is held in the Swiss capital Bern in the Käfigturm, a fomer prison situated in a medieval stone tower with a good view of the city. “It is the perfect venue to exercise freedom of thought”, Werner Nussbaum, president and co-founder of IZS.

In April 1996, Nussbaum got together with three other colleagues from the Swiss pension world to establish an independent discussion forum “using new forms of communication and debates”, he explains. They were Ernst Rätzer, pension specialist at Aon Hewitt and vice president of the IZS, Claude Chuard, independent actuary and still on the IZS board today, and Hans-Peter Sieber, former head of the Teachers Pension Fund of the Canton of Bern.

Previously, Nussbaum had led the federal government unit implementing the legal framework governing the second pillar, the BVG and served as the head of the federal pension supervisory body. Later he was a member of the federal BVG-commission, the advisory board of the federal government. In the 1990s he was also a guest researcher at Stanford University in California.

Returning to Switzerland in 1996 he realised that people were still too inward-looking regarding the second pillar. “Many said an independent think-tank was not necessary for Switzerland as our system is famous everywhere and does not need to be improved,” Nussbaum recalls.

But soon the IZS took on its first members and in September 1996 it arranged the first major event on a hot topic of that time. Parliament had intended to force pension funds to invest in venture capital and in infrastructure products like the Alpentransfer railway-system.

“Members of the parliamentary commission attended, as well as leading experts from the US, and the event got a lot of attention. In the end, parliament decided against the plans of its commission, which had also been the consensus at the conference,” says Nussbaum.

Since then the IZS holds large-scale conferences on fundamental topics touching the future of the second pillar, as Nussbaum puts it. He says a lack of forward thinking and complacency remain the main problems in the Swiss second pillar. He is also quite critical about the latest reform in the Swiss second pillar, the so-called structural reform, which he calls “rather cosmetic” and “reactive”. For instance, Nussbaum would have liked to have seen a much stronger centralised pension supervisory body, using a preventative and integrated model

Over time, IZS realised that conferences in Switzerland were not enough. “We started to go abroad into countries with similar but also with other problems like the Netherlands, Sweden, the UK, Germany, France, Belgium, and Austria, and this year we probably will go to Italy,” says Nussbaum. “The pension world is getting more international and so do the problems, so we have to openly discuss certain topics within an independent framework and without taboos”.

Beside the annual conference, the ‘BVG-Arena’, and the discussion forum attended by 30-40 experts every month in Bern, co-operating in research with universities is another major part of IZS’s calendar. The think-tank suggests topics to researchers and helps publicise the results. Personal ties already exist with the University of St. Gallen, and from late summer Nussbaum will head a new department for international pension system comparison at the University of Applied Science in Lucerne.

“It is a Swiss ailment that research is never considered in pension reforms – only sometimes does someone come along with results that are then used. This is baffling given the actual volume of the Swiss second pillar at around CHF800bn [€645bn],” Nussbaum points out.

Through universities, IZS is also hoping to gain greater numbers of younger members.
Currently, around 120 to 130 individuals from a variety of organisations – including pension funds, consultants and banks – have signed up to the think-tank’s statutes. “And everybody can join,” says Nussbaum, emphasising that the IZS itself will always remain an economic and political independent body, based on freedom of thinking and creativity.
In this capacity, members of parliament are invited to discuss with IZS to be better informed on complex pension issues before they decide on them. To this end, the think-tank will hold regular meetings, called ‘BVG-Foyer’, with parliamentarians from this year.

Looking across Swizerland’s borders, Nussbaum wonders how long it will take to introduce a mandatory occupational pension system everywhere. He notes that this is not a panacea and that there are tax incentives in place in Switzerland for above-mandatory contributions without which the system would probably not work. “But it helps a great deal,” he concludes.

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